Britain can’t afford tax cuts in this budget, and Jeremy Hunt knows it

Thank heaven for the Institute for Fiscal Studies. The respected economic research think tank has released its thoughts on the outlook for next month’s Budget, which is almost certainly the last one before a general election. It should make sobering reading for Jeremy Hunt and Rishi Sunak.. if they bother reading it at all.

The IFS view points to the need for a complete reappraisal of where the country is heading – not something we are expecting on March 6, or from this government over it’s remaining time in office. It starts with an obvious fact: “UK taxes are heading to record-high levels as a share of national income”.

Yet while the chancellor is under intense pressure from the right to slash taxes, there just isn’t the room to do so – not now and not in the near future. Even the so called “headroom” that Hunt may claim is available is based on dodgy long-term predictions and completely unfeasible cuts to public spending, sometime after the election.

As the IFS puts it rather diplomatically, “Unless the chancellor is willing to spell out where the cuts will fall, the temptation to scale back provisional spending plans further to ‘pay for’ new tax cuts should be avoided.” It is, not to put too fine a point on it, totally implausible to think that there is room for spending cuts on anything like the scale necessary to fund the stuff that is being leaked to the right wing press, with a 1% cut in national insurance that would cost £4.5bn per year just the latest idea being floated.

But that is just the short-term. Longer term demographics means that spending will have to rise and rise further than the government is predicting on things like health and care, while defence spending is in dire straits and neds to rise significantly too.

In short, I would say, the chancellor’s predictions are unbelievable and unachievable. Any tax “cuts” he announces next month will be dwarfed by rises already announced for years to come and even these are unaffordable. The UK’s tax take is currently at a post-war high, and it is going to keep on rising.

You cannot continue to borrow ever more, pretend that you are going to cut taxes and claim that you can slash spending ever further while protecting the big spending areas like the NHS and the armed forces. It is just not possible.

Tax levels in the UK are still quite low by international standards. It is perfectly possible to tax at well over 40% and have a dynamic, fast-growing economy.

But the real problem is not the maths, it is the media. The UK’s population has been told for decades now that they can have low taxes and everything else as well and they believe it.

That needs to end but in fact the right wing media is doubling down on this issue. Now some are claiming that Liz Truss was right, that trickle-down economics really works, that there is room for more tax cuts and even that only with more tax cuts will the economy ever grow again or even that without cutting taxes the country will be destitute.

All this is utter rubbish, and the Tufton Street Tories are in a desperate tizz. That is why they look at these figures and decide that the NHS is unaffordable, the old cost too much and benefits need to be slashed again.
They can see their cunning plans falling to pieces, their dreams of Singapore-on-Thames dying before their eyes. Their billionaire backers might actually have to pay some taxes and contribute to society.

They are scared and therefore dangerous. The last thing they want is a clear, logical debate on the country’s finances. But until we have that there is no real chance of a realistic economic policy.